{"id":115459,"date":"2021-06-29T20:58:03","date_gmt":"2021-06-29T15:28:03","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=115459"},"modified":"2021-06-29T20:59:57","modified_gmt":"2021-06-29T15:29:57","slug":"reopen-the-files-reconsider-privatisation","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/reopen-the-files-reconsider-privatisation\/","title":{"rendered":"Reopen the files, reconsider privatisation"},"content":{"rendered":"\n<p><b>Source<\/b><span style=\"font-weight: 400;\">: <strong><a href=\"https:\/\/epaper.thehindu.com\/Home\/ShareArticle?OrgId=GEJ8NB6DL.1&amp;imageview=0\" target=\"_blank\" rel=\"noopener\">The Hindu<\/a><\/strong>\u00a0<\/span><\/p>\n<p><strong>Relevance<\/strong>: Privatisation has the potential to alter the functioning of the Indian economy.<\/p>\n<p><b>Synopsis<\/b><span style=\"font-weight: 400;\">:\u00a0<\/span><span style=\"font-weight: 400;\">In the backdrop of an economic contraction, it is important to revisit the aggressive privatization of public enterprises. Focus should be on adopting different strategies for sick and profitable units.\u00a0<\/span><\/p>\n<h5><b>Background<\/b><span style=\"font-weight: 400;\">:\u00a0<\/span><\/h5>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Privatization of the public sector, including banks, has been part of economic reforms since 1991. This was at the core of the \u2018<strong>Washington Consensus\u2019<\/strong> which believes that the private sector is inherently more efficient.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The socio-political realities of India prevented outright privatisation. However, progressive disinvestment of the shares of public sector undertakings has been taking place over the years.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Privatisation is now happening, with great vigor and dedicated targets. However, India is right now going through its worst economic crisis.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Unemployment has risen, incomes are falling, and the fiscal deficit is rising. In this situation, outright privatisation may not be justified.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h5><b>Concerns associated with Outright privatisation<\/b><span style=\"font-weight: 400;\">:<\/span><\/h5>\n<ul>\n<li style=\"font-weight: 400;\"><b>First<\/b><span style=\"font-weight: 400;\">, the number of<\/span><b> Indian private firms which can buy out public sector firms is limited<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><span style=\"font-weight: 400;\">Their limited financial and managerial resources can be better utilised;\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">In taking over numerous private firms up for sale through the bankruptcy process.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">In investing in various brownfield and greenfield projects<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\"><b>Second<\/b><span style=\"font-weight: 400;\">, the Sale at fair or lower than fair valuations to foreign entities has adverse implications from the perspective of being \u2018<\/span><b>Atma Nirbhar<\/b><span style=\"font-weight: 400;\">\u2019.<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Third<\/b><span style=\"font-weight: 400;\">, PSU enterprises provide for <\/span><b>reservations<\/b><span style=\"font-weight: 400;\"> in recruitment. With privatisation, this would end and unnecessarily generate social unrest.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Fourth<\/b><span style=\"font-weight: 400;\">, the Government has been able to use its ownership to get banks and public enterprises to do <\/span><b>so many things on an immediate basis during the pandemic<\/b><span style=\"font-weight: 400;\">. This would not have been possible with private ownership.<\/span><\/li>\n<\/ul>\n<h5><b>Types of Public Sector Undertakings (PSUs):<\/b><\/h5>\n<ul>\n<li style=\"font-weight: 400;\"><b>First<\/b> <b>Category<\/b><span style=\"font-weight: 400;\">: Enterprises which have been sick for a long time. Their technology, plants and machinery are obsolete while managerial and human resources have become inefficient.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Second<\/b> <b>Category<\/b><span style=\"font-weight: 400;\">: Enterprises which have been financially sick but can be turned around. Their difficulties can be traced to ministerial micromanagement, especially in enterprises with a direct consumer interface. For example, Air India and the India Tourism Development Corporation (ITDC) hotels.\u00a0\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Third<\/b> <b>Category<\/b><span style=\"font-weight: 400;\">: Enterprises that are generating decent profits.<\/span><\/li>\n<\/ul>\n<h5><b>Cautious approach towards PSUs<\/b><span style=\"font-weight: 400;\">:<\/span><\/h5>\n<ul>\n<li style=\"font-weight: 400;\"><b>First Category<\/b><span style=\"font-weight: 400;\">: Government should close these in a time-bound manner with a generous handshake for labour.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">These enterprises may be taken away from their parent line Ministries and brought under one holding company. The company should have the sole mandate of speedy liquidation and asset sale.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\"><b>Second Category<\/b><span style=\"font-weight: 400;\">: <\/span><b>Private management through induction of a strategic partner<\/b><span style=\"font-weight: 400;\"> is the best way to restore the value of these enterprises.<\/span>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">They should ideally be made debt-free and new management should be given freedom in personnel management to get investor interest.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Once debt-free, management control with a 26% stake may be given. As valuation rises, the Government could reduce its stake further and get more money.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\"><b>Third Category<\/b><span style=\"font-weight: 400;\">: The Government can continue to reduce its shareholding by offloading shares. It can even reduce its stake to less than 51% while<\/span><b> remaining the promoter and being in control<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">This would help in producing Global Champions, as done by China. The country has <\/span><b>91 state-owned enterprises in the Fortune 500 list<\/b><span style=\"font-weight: 400;\">. <\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Source: The Hindu\u00a0 Relevance: Privatisation has the potential to alter the functioning of the Indian economy. Synopsis:\u00a0In the backdrop of an economic contraction, it is important to revisit the aggressive privatization of public enterprises. Focus should be on adopting different strategies for sick and profitable units.\u00a0 Background:\u00a0 Privatization of the public sector, including banks, has&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/reopen-the-files-reconsider-privatisation\/\">Continue reading <span class=\"screen-reader-text\">Reopen the files, reconsider privatisation<\/span><\/a><\/p>\n","protected":false},"author":10322,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[],"class_list":["post-115459","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704662885},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/115459","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10322"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=115459"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/115459\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=115459"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=115459"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=115459"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}